Corporate Governance and Capital Structure in Brazil: Stock, Bonds and Substitution

• Autor(a) principal: Ripamonti, Alexandre
• Data de Publicação: 2016
• Outros Autores: Kayo, Eduardo Kazuo
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: RAM. Revista de Administração Mackenzie
• Texto Completo: https://editorarevistas.mackenzie.br/index.php/RAM/article/view/7204
• topic: Stock Market Development; Bond Market Development; Capital Structure; Corporate Governance; Bond and Stock Complementarity Hypothesis; Desarrollo del Mercado de Acciones. Desarrollo del Mercado de Deudas. Estructura de Capital. Gobierno Corporativo. Hipótesis de complementariedad entre deudas y acciones.; Desenvolvimento do Mercado de Ações. Desenvolvimento do Mercado de Dívidas. Estrutura de Capital. Governança Corporativa. Hipótese de complementariedade entre dívidas e ações.

Purpose: To study the Brazilian bond and stock markets for testing the stock market development theory of Demirgüc-Kunt & Maksimovic (1996).Originality/Gap/Relevance/Implications: This paper tests the substitution hypothesis of stock market development, from debt to stocks, in a context of improved corporate governance, by analysing the data with cointegration techniques. The findings show that the substitution hypothesis is rejected, as the bond market has a positive and significant association with stock market improvements. The findings also show that improving the quality of corporate governance could lead own and borrower capital sources to be complementary and not substitutes, suggesting that Brazilian stock market reform has created a virtuous development cycle.Key methodological aspects: Positivist research using quantitative methodology. Data from a sample of 171 firms during 20 years´ analysed with cointegration. The null was a negative association between bond and stock markets.Summary of key results: Null rejection, non-consistent to theoretical framework. The results have shown a positive and significant association between stock and debt in an improved corporate governance context.Key considerations/conclusions: Improving the quality of corporate governance could lead own and borrower capital sources to be complementary and not substitutes, suggesting that Brazilian stock market reform has created a virtuous development cycle.